Eurozone PMI

Eurozone: Eurozone composite PMI ends the year on solid footing

December 16, 2015

Activity in the private sector in the Eurozone saw a solid end to 2015. The preliminary flash Eurozone Composite Purchasing Managers’ Index (PMI), elaborated by Markit, edged down from a revised 54.2 in November (previously reported: 54.4) to 54.0 in December. The print also undershot the 54.0 the markets had expected. According to Markit, despite the moderation in December, the indicator remained “well above the 50.0 level. ”Business activity increases above the 50-level. Markit also commented that, “the expansion seen in December was sufficient to complete the strongest quarter of growth recorded by the survey for four-and-a-half years.”

Solid growth in Eurozone business activity continued to be supported by the services sector. In addition, manufacturing production rose at the fastest pace in 20 months and outpaced services’ growth rate for the first time in over a year. December’s survey showed that both sectors saw an improvement in new business, which prompted businesses in both sectors to increase staff. Firms will likely continue to increase staff in the coming months, as suggested by companies’ largest increase in backlogs of work since May 2011. Input costs, meanwhile, increased in December, largely due to a combination of higher import duties and the depreciation of the euro.

Regarding the two largest Eurozone economies, in December the Composite PMI rose in Germany to a three-month high while it slipped in France and signaled that activity is close to stagnation. The remainder of the region saw yet another improvement, registering a four-month high in December.

December’s result is welcoming news that the Eurozone recovery remains in place in the last quarter of the year. Markit concluded, however, that, “The Eurozone economy enjoyed a comfortably solid end to 2015, though policymakers are likely to remain disappointed by the relatively modest pace of expansion and lack of inflationary pressures, given the stage of the recovery and the amount of stimulus already in place.” Encouraging is that the PMI continues to signal that economic growth in the last quarter of 2015 remained solid, which produced more jobs and, hopefully, paves the way for unemployment to fall more rapidly as we move into 2016.

In its December assessment of the economy, the European Central Bank (ECB) expects the Eurozone economy to increase 1.5% in 2015. For 2016, the ECB sees economic growth rising to 1.7% and picking up further to 1.9% in 2017. Met the why particular Consensus Forecast panelists expect the Euro area economy to expand 1.7% in 2016, which is unchanged from last month’s forecast. For 2017, panelists expect the economy to expand 1.7%.

Author:Ricardo Aceves, Senior Economist

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